Increasing a tenant’s rent that has fallen below market: a guide for landlords
Rent increases for tenants of residential property in British Columbia are controlled by the British Columbia Residential Tenancy Act. A landlord is permitted to increase his or her tenant’s rent every 12 months, and must give the tenant at least three months’ notice of the increase. Each year, however, a landlord is only permitted to increase his or her tenant’s rent by an amount equal to the inflation rate + 2%. If a landlord does not increase his or her tenant’s rent on an annual basis, it is possible—and probable in a red-hot rental market like that in Metro Vancouver—that the tenant’s rent will soon become much lower than the market rent for similar rental units. Fortunately, if you are a landlord and you have not increased your tenant’s rent for a number of years, the Residential Tenancy Act provides for certain methods to bring your tenant’s rent back in line with market rent.
1. Obtain your tenant’s written consent to an additional rent increase
The Residential Tenancy Act provides that a landlord may increase his or her tenant’s rent up to an amount agreed to by the tenant in writing. This is the simplest method of increasing rent beyond the annual amount that is allowed for by the Residential Tenancy Act. However, increasing a tenant’s rent through this method requires the tenant’s agreement; he or she cannot be forced to accept a rent increase beyond the annual amount.
If your tenant’s rent is significantly lower than market rent, you may be able to persuade him or her to agree to an increase in rent to bring the rent closer to market rent for similar rental units. Inform the tenant that if he or she does not agree to such an increase, your alternative is to commence dispute resolution at the British Columbia Residential Tenancy Branch. The tenant may be willing to agree to a reasonable increase to avoid having to engage in the dispute resolution process, which would save both you and the tenant time and money.
It is important to note that even if your tenant agrees to a rent increase over and above the annual amount allowed for by the Residential Tenancy Act, you are still required to provide the tenant with three months’ notice before the increase can go into effect. Any such written agreement between a landlord and tenant for a rent increase should clearly set out the amount of the increase and the tenant must clearly indicate his or her agreement to the increase.
2. Apply for an order from the Residential Tenancy Branch for an additional rent increase
If your tenant refuses to consent to a rent increase over and above the yearly increase allowed for by the Residential Tenancy Act and the rent for your rental unit is significantly lower than that for other similar rental units in the area, you can apply to the Residential Tenancy Branch for dispute resolution to request approval for a rent increase that is greater than the annual allowable increase.
You will be required to attend a dispute resolution hearing at which you must present your case to an impartial arbitrator. The tenant will also be invited to attend the hearing but as the landlord applying for dispute resolution, you will carry the burden of proof. What this means is that, in order to be successful at the hearing, you must present evidence sufficient to prove, on a balance of probabilities, that the rent for your rental unit is significantly lower than that for similar rental units. If you do not meet this threshold your application for an additional rent increase will be dismissed.
The most important evidence in an application for a rent increase is evidence of the rent payable for other rental units that are similar in size, quality and location to your rental unit. You should bring to the dispute resolution hearing copies of rental advertisements for a number of comparable rental units as evidence of present market rent in the area of your rental unit.
Important considerations when selecting comparable rental units to use as evidence of market rent include whether the comparable units have similar amenities and features to your rental unit (e.g. in-suite laundry, fireplace, parking, storage, view etc.), the age and condition of the comparable units relative to your rental unit, and also the relative proximity of the comparable units and your rental unit to shopping, restaurants, movie theatres, public transit and/or other facilities, or conversely to heavily trafficked thoroughfares, train tracks, industrial areas etc. The relative Residential Tenancy Branch guideline for rent increases also indicates that interior and exterior ambiance of the comparable rental units as well as sense of community are factors to be taken into consideration.
Ultimately, when you are searching for comparable units to present as evidence of what you say market rent is for your rental unit, your goal should be to find rental units that are identical in every respect to your rental unit, except that they all have relatively similar but significantly higher rents than your rental unit.
For more information regarding rent increases, see Residential Tenancy Policy Guideline #37 – Rent Increases, which is located on the B.C. Residential Tenancy Branch website at:
Carl May, BComm, JD